FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2003
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Transition period from _____ to
Commission File Number 0-13881
CITY INVESTING COMPANY LIQUIDATING TRUST
(Exact name of registrant as specified in its charter)
Delaware 13-6859211
(State of organization) (I.R.S. Employer Identification No.)
853 Broadway, Suite 1607 10003-4703
New York, New York (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (212) 473-1918
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
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At June 30, 2003 there were 38,979,372 Trust Units of Beneficial Interest
outstanding.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CITY INVESTING COMPANY LIQUIDATING TRUST
Statements of Operations
Second Quarter and Six Months ended June 30
(Unaudited)
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Second Quarter Six Months
($ in thousands, except per unit data) 2003 2002 2003 2002
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Gains (losses) on dispositions of assets, net $101 ($30) $99 ($419)
Interest, dividend and other income 522 649 928 1,440
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Total income 623 619 1,027 1,021
Administrative expenses 73 74 198 220
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Net income $550 $545 $829 $801
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Net income per unit $0.01 $0.01 $0.02 $0.02
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Outstanding units 38,979 38,979 38,979 38,979
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Balance Sheets
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(Unaudited)
June 30, December 31,
($ in thousands) 2003 2002
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Assets
Cash and cash equivalents $75 $158
U.S. Treasuries 82,899 81,485
Restricted funds 4 4
Investments 27 27
Mortgage receivable, net of deferred gain 1,004 1,506
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Total assets $84,009 $83,180
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Liabilities and trust equity
Trust equity $84,009 $83,180
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Total liabilities and trust equity $84,009 $83,180
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See accompanying notes to financial statements.
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CITY INVESTING COMPANY LIQUIDATING TRUST
Statements of Cash Flows
Six Months ended June 30
(Unaudited)
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($ in thousands) 2003 2002
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Cash flows from operating activities:
Net income $829 $801
Adjustments to reconcile net income to
net cash provided by operating activities:
Gain on sale of real estate (183) (183)
Gain on sale of stock - (29)
Amortization of premium of investment securities 674 707
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Net cash provided by operating activities 1,320 1,296
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Cash flows from investing activities:
Proceeds from sale of real estate 685 685
Proceeds from sale of stock - 29
Maturities/sales of investment securities 40,580 39,992
Purchases of investment securities (42,668) (42,123)
Restricted funds - (1)
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Net cash used for investing activities (1,403) (1,418)
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Net decrease in cash and cash equivalents (83) (122)
Cash and cash equivalents at beginning of year 158 187
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Cash and cash equivalents at end of period $75 $65
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Statements of Changes in Trust Equity
Six Months ended June 30
(Unaudited)
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($ in thousands) 2003 2002
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Balance at beginning of period $83,180 $81,676
Net income 829 801
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Balance at June 30 $84,009 $82,477
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See accompanying notes to financial statements.
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CITY INVESTING COMPANY LIQUIDATING TRUST
Notes to Financial Statements
(Unaudited)
Note 1 - Organization
The accompanying financial statements for the City Investing Company Liquidating
Trust (the "Trust") are unaudited. In the opinion of the Trustees, the interim
financial statements reflect all adjustments necessary for a fair presentation
of the financial position and income and expenses of the Trust as prepared on a
Federal income tax basis. Results for interim periods are not necessarily
indicative of results for the full year.
Note 2 - Basis of Accounting
The accompanying financial statements have been prepared on the basis of
accounting used for Federal income tax purposes. Accordingly, certain revenue
and the related assets are recognized when received rather than when earned; and
certain expenses are recognized when paid rather than when the obligation is
incurred; and assets are reflected at their tax basis.
Note 3 - Gains (Losses) on Dispositions of Assets
Gains (losses) on dispositions of assets, net, include legal fees attributable
to issues that relate to periods before the liquidation of City Investing
Company ("City").
Note 4 - Investment Securities
Investment securities, all of which mature within one year, consist of U.S.
Treasuries and are carried at original cost, net of premium amortization
recorded at interest collection dates. The fair value of U.S. Treasuries is
based on quoted market prices. Investment securities consist of the following:
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June 30, 2003 December 31, 2002
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Carrying Amortized Fair Carrying Amortized Fair
($ in thousands) Value Cost Value Value Cost Value
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U.S. Treasuries $82,899 $82,899 $83,708 $81,485 $81,485 $81,886
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The gross unrealized gains on investment securities amounted to the following:
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June 30, December 31,
($ in thousands) 2003 2002
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Gross unrealized gains $809 $401
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Note 5 - Restricted Funds
Restricted funds at June 30, 2003 and December 31, 2002 represent a rent deposit
of $4,000.
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CITY INVESTING COMPANY LIQUIDATING TRUST
Notes to Financial Statements (continued)
(Unaudited)
Note 6 - Investments
Investments are as follows:
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June 30, December 31,
($ in thousands) 2003 2002
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Oklahoma Energy Corp. $27 $27
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The Trust holds 310,810 shares of Oklahoma Energy Corp. common stock, which are
carried at their tax basis. At June 30, 2003 and December 31, 2002, the fair
market value of the Oklahoma Energy stock, based on quoted market prices, was
$3,108 and $9,324, respectively.
Note 7 - Real Estate
In February 2000, the Trust sold 39 percent of certain real estate acreage for
$2,410,000 in cash, which resulted in a recognized long-term capital gain, net
of expenses, of $610,000. In May 2000, the Trust sold its remaining real estate
acreage for $478,000 in cash and a non-recourse promissory note of $3,683,000,
payable in five equal annual installments plus interest at 8 percent. The May
2000 sale resulted in a recognized long-term capital gain, net of expenses, of
$171,000 and deferred gain of $1,173,000. The deferred gain of $1,173,000 was
recorded as a reduction to the $3,683,000 mortgage receivable. In June 2002 and
2003, cash payment installments of $907,000 and $850,000, were received which
resulted in a recognized long-term gain, net of expenses, of $183,000 in each of
the years and net interest income of $222,000 and $177,000, respectively. The
deferred gains of $469,000 at June 30, 2003 and $704,000 at December 31, 2002,
are netted against the gross mortgage receivable of $1,473,000 at June 30, 2003
and $2,210,000 at December 31, 2002. It is projected that the remaining deferred
gain of $469,000 will be subject to expenses estimated to be $102,000.
Note 8 - Litigation and Other Contingent Liabilities
In accordance with the Trust Agreement, the Trust has assumed the obligation to
make payments, where required, to discharge certain litigation and other
contingent liabilities of City Investing Company which existed at September 25,
1985, or which have subsequently arisen. The Trust is subject to possible claims
by the United States Environmental Protection Agency and other third parties,
including:
AmBase Corporation v. City Investing Company Liquidating Trust, et al. (01 Civ.
0771): On April 3, 2003, the United States Court of Appeals for the Second
Circuit (Docket No. 02-7230) affirmed the District Court's dismissal of this
action commenced by AmBase Corporation against the Trust. AmBase filed a
petition for rehearing with the Court of Appeals for the Second Circuit which
was denied on June 12, 2003. AmBase has the right to petition for review of the
Second Circuit's dismissal of the action to the United States Supreme Court
within 90 days of the most recent Court of Appeals' action.
Note 9 - Future Distributions of Trust Assets
Pending resolution of possible claims by the Environmental Protection Agency and
other third parties, see Note 8 to Financial Statements - Litigation and Other
Contingent Liabilities, the Trust is unable to make any dividend payments or
liquidation distributions.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
It is difficult to compare amounts in comparable periods, as the financial
statements of the Trust are prepared on the basis of accounting used for Federal
income tax purposes; that is, amounts are reflected in the financial statements
when amounts are received or paid.
The Trust recorded net income of $550,000 ($0.01 per unit) in the second quarter
of 2003 and net income of $829,000 ($0.02 per unit) in the six-month period
ended June 30, 2003, compared to net income of $545,000 ($0.01 per unit) and net
income of $801,000 ($0.02 per unit) in the corresponding 2002 periods. The
reported gains (losses) on the dispositions of assets, net, reflect gains of
$101,000 in the second quarter and $99,000 in the six-month period of 2003 as
compared to losses of $30,000 and $419,000 in the respective 2002 periods. In
February 2000, the Trust sold 39 percent of certain real estate acreage for
$2,410,000 in cash, which resulted in a recognized long-term capital gain, net
of expenses, of $610,000. In May 2000, the Trust sold its remaining real estate
acreage for $478,000 cash and a non-recourse promissory note of $3,683,000,
payable in five equal annual installments plus interest at 8 percent. The May
2000 sale resulted in a recognized long-term capital gain, net of expenses, of
$171,000 and deferred gain of $1,173,000. The deferred gain of $1,173,000 was
recorded as a reduction to the $3,683,000 mortgage receivable. In June 2002 and
2003, cash payment installments of $907,000 and $850,000, were received which
resulted in a recognized long-term gain, net of expenses, of $183,000 in each of
the years and net interest income of $222,000 and $177,000, respectively. The
deferred gains of $469,000 at June 30, 2003 and $704,000 at December 31, 2002,
are netted against the gross mortgage receivable of $1,473,000 at June 30, 2003
and $2,210,000 at December 31, 2002. It is projected that the remaining deferred
gain of $469,000 will be subject to expenses estimated to be $102,000. Legal
fees, relating to issues attributable to periods before the liquidation of City
are reflected as losses on disposition of assets, net, amounted to $82,000 in
the second quarter of 2003 and $84,000 in the six month period ended June 30,
2003 compared to $242,000 and $631,000 in the corresponding 2002 periods. In
June 2002, the Trust received $29,000 proceeds on the sale of Prudential
Financial Inc. shares that was reported as long-term capital gain.
Interest, dividend and other income, principally consisting of interest earned
on the investment of cash equivalents and investment securities, was $522,000
and $928,000 in the second quarter and six months ended June 30, 2003, and
$649,000 and $1,440,000 in the corresponding 2002 periods. The decreases in the
2003 periods were primarily due to lower interest rates in 2003 versus 2002
periods. Administrative expenses were $73,000 and $198,000 for the second
quarter and six months of 2003, compared with $74,000 and $220,000 for the
comparable 2002 periods. In 2003, the largest single item to decrease was legal
expenses.
At June 30, 2003, the Trust had cash and cash equivalents and U. S. Treasuries
of $82,974,000. The Trustees believe that such cash resources and investment
securities are sufficient to meet all anticipated liquidity requirements.
ITEM 4. DISCLOSURE CONTROLS AND PROCEDURES
As of the end of the period covered by this report, the Trust carried out an
evaluation, under the supervision and with the participation of the Trust's
management, including the trustee who is the functional equivalent of the Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of the Trust's internal disclosure controls and procedures
pursuant to Exchange Act Rule 13a-15. That Rule requires that such controls and
procedures assure that information required to be included in the Trust's
periodic SEC filings is recorded, processed, summarized and reported within the
time periods specified by the rules and forms. Based upon that evaluation, the
Trustees concluded that the Trust's internal disclosure controls and procedures
are effective in assuring that information required to be disclosed by the Trust
in its periodic SEC filings is accurate and communicated to the Trust's
management in order to allow timely decisions regarding required disclosure.
There have not been any significant changes in internal controls or in other
factors that could significantly affect internal controls subsequent to the date
of such evaluation.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The information contained under Legal Proceedings in the Trust's Annual Report
on Form 10-K for the year ended December 31, 2002 is incorporated by reference
herein. Except as set forth in Note 8 to Financial Statements - Litigation and
Other Contingent Liabilities herein, there have been no material developments in
such legal proceedings subsequent to the date of that information.
Pending resolution of possible claims, see Note 8 to Financial Statements -
Litigation and Other Contingent Liabilities, the Trust is unable to make any
dividend payments or liquidation distributions.
ITEM 2. CHANGES IN SECURITIES
Trust Units of Beneficial Interest. On June 18, 2003, the Trustees amended the
Trust agreement to extend the existence of the Trust (and thereby the existence
of the Trust Units) until the earlier of (a) the complete distribution of the
Trust Estate or (b) September 25, 2004, unless an earlier termination is
required by the applicable laws of the State of Delaware or by the action of the
Beneficiaries as provided in Section 4.2 of the Trust Agreement or a later
termination is required by the Trustees pursuant to Section 6.2 (q) of the Trust
Agreement.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
1. Action taken by Trustees under City Investing Company Liquidating
Trust Agreement dated June 18, 2003.
99.1. Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
99.2. Certification Pursuant to Section 302(a) of the Sarbanes-Oxley Act of
2002.
(b) Reports on Form 8-K:
The Registrant was not required to file a Current Report on Form 8-K during
the quarter ended June 30, 2003.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned there unto duly authorized.
CITY INVESTING COMPANY LIQUIDATING TRUST
/s/ Lester J. Mantell
Date: July 22, 2003 By: LESTER J. MANTELL, Trustee
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